Committee to Review First Annual Readoption of Investment Policy Containing New Fossil Fuel, Weapons, Tobacco and Prison Screens

Pasadena’s Finance Committee is scheduled Monday to review the city’s Fiscal Year 2026-2027 Investment Policy and Investment Strategy — the first annual readoption since the City Council, on May 11, formally inserted into Section X of the policy a binding prohibition against investing surplus city funds in companies engaged in fossil fuel production, weapons manufacturing, tobacco or private prisons.

The new language, quoted verbatim in the staff report, reads: “The City Treasurer or any other authorized individual or company managing the investments of the City’s surplus funds shall not invest in companies that engage in the production of fossil fuel, weapons manufacturing, tobacco, or private prisons.”

The Department of Finance states that “other than the amended language in Section X of the policy, there has been no other changes in the City’s Investment Policy.” The June 8 action would lock that language in for the coming fiscal year.

The committee serves in an advisory capacity, and its vote would be a recommendation forwarded to two bodies that retain final authority: the City Council and the Successor Agency to the Pasadena Community Development Commission, which would act jointly on the readoption.

The codification did not require the Treasurer to divest.

Following a December 18, 2025, discussion at the Legislative Policy Committee, which “requested a review of the City’s investment policy and portfolio to ensure exclusion of direct investments in companies engaged in fossil fuel production, weapons manufacturing, tobacco and private prisons,” staff reviewed the portfolio. That review, the report states, “confirmed that the City’s portfolio does not include direct investments in companies engaged in fossil fuel production, weapons manufacturing, tobacco, or private prisons.” The May 11 Council action made compliance mandatory going forward.

The broader Investment Policy, governed by California Government Code Section 53600 et seq. and the prudent person rule, applies to all financial assets and investment activities of the City of Pasadena, the Successor Agency to the Pasadena Development Commission, the Pasadena Center Operating Company, the Rose Bowl Operating Company and the Pasadena Community Access Corporation. Bond proceeds, employee retirement funds, Section 115 Trust funds and Deferred Compensation funds are exempt. Safety of principal is the foremost objective, followed by liquidity, with yield ranked third.

The policy lists 21 categories of authorized investments, including United States Treasury bills, bonds and notes; obligations of federal agencies including the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Bank; banker’s acceptances; commercial paper of “prime” quality; negotiable certificates of deposit; repurchase and reverse repurchase agreements; the state’s Local Agency Investment Fund; the California Asset Management Program; collateralized money market bank accounts; medium term corporate notes; shares of beneficial interest in diversified management companies; and Municipal Variable Rate Demand Bonds. Investments in securities with stated maturities exceeding five years are generally prohibited, with exceptions for the Power Reserve portfolio, bond reserve funds and the Stranded Investment Reserve Fund. Collateral for certificates of deposit and repurchase agreements must be at least 102 percent of the market value of principal and accrued interest.

The accompanying Investment Strategy describes a two-tier portfolio: a liquidity tier of short-term instruments — bank deposits, money market funds, the Local Agency Investment Fund, repurchase agreements, Treasury bills, agency discount notes, certificates of deposit, banker’s acceptances, commercial paper and the California Asset Management Program — and a reserve tier of longer-term instruments with modified duration up to three years, including U.S. Treasury bonds and notes, government agency bonds, corporate bonds and municipal bonds. The Treasurer typically maintains an average balance of at least $40 million in the short-term liquid portion of the portfolio with a maturity of one week or less. Twelve- and eighteen-month cash forecasts are monitored and updated, and the portfolio is tested monthly to ensure legal limits on types of investments are not exceeded.

The Department of Finance reports no fiscal impact from the proposed action and no anticipated impact to other operational programs or capital projects. The action supports the Council’s strategic goal to maintain fiscal responsibility and stability.

The report was submitted by Karin Schnaider, Director of Finance and Successor Agency Finance Officer, prepared by Vic Erganian, Deputy Director of Finance/City Treasurer, and approved by Matthew E. Hawkesworth, Interim City Manager and Successor Agency Interim Executive Director.

The Finance Committee is scheduled to meet at 4 p.m. on Monday, June 8, in the Pasadena City Hall Council Chamber, Room S249, 100 North Garfield Avenue, in Pasadena. For more information call (626) 744-4141 or visit https://www.cityofpasadena.net/commissions/agendas/.